Saturday, August 29, 2015

Saturday Notes Continued, Part IV -- August 29, 2015

See "continued notes, Part III" to explain this note.

I skimmed through this article over at Seeking Alpha on the break-even prices in the Bakken, but articles like this don't interest me a whole lot -- at least not any more. I'm not sure why. They may have interested me at one time. What does interest me is the comments on articles like these, and in this case, no different. Some of the comments are priceless. My pet peeve is when anyone asks how long a typical Bakken well will last when trying to sort out the economics. We've discussed that so many times; so irrelevant.

By the way, that MacKenzie graph from Seeking Alpha was posted on the blog (or if not posted, linked) back in October, 2014. I had not seen that graph in a long, long time, but it is way out of date, at least for the Bakken.

On another note, the Casper Star Tribune is reporting that an ethanol plant in Torrington, Wyoming, is closing down. The article talks about how efficient this ethanol plant was (at least compared to others), but one needs to get deep into the article to learn that the plant was no longer financially viable when the state ended the 40-cent per gallon tax credit for ethanol this past June.

A spokesman said the tax credit's expiration came as crude prices fell, driving down what the plant could fetch for its ethanol. The combination proved fatal. There are many, many story lines but it is not worth the effort. I am just amazed that an ethanol plant as efficient as this one could not survive without a 40-cent/gallon tax credit. Holy husks of corn. This is a credit we're talking about, not a deduction. A full-fledged tax credit. For every dollar the company owes in taxes, they send the state only 60 cents; what a great deal. If I had been asked what the credit had been without knowing, I might have guessed three to five  cents, certainly not 40 cents.

The other story line, of course, is how many more such plants will announce closure over the next 24 months. One wonders about the new Spiritwood ethanol plant in Jamestown, ND.

I assume as more ethanol plants get shut down, we will see a rise in wind / solar energy projects where there are still tax incentives to build those. Here's another example of these intermittent energy projects being financed simply for the tax credits. The Casper Tribune reports that a New York-based hedge fund is trying to kick-start a wind farm project that was dying on the vine.

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